What I'm about to share is
important to users of bitcoin mining pools who use CoinBase for their wallet and/or to convert bitcoin into USD. If you have more than 200 transactions [Easily done with a payout for every block in a matter of several months] -AND- more than $20,000 in transactions.
I received the following email from coinbase today after they asked if I use my coinbase account primarily for business or personal use. I told them business because my business checking account is linked to Coinbase. I write off expenses related to bitcoin mining. All payroll [since I began mining on September 22, 2014] still comes from my telephony training at the moment. All profits [After expenses] from bitcoin mining are put back into buying more rigs.
So, no payroll from profits made from bitcoin mining at the moment while I use those profits to grow my business [of mining]. I know of many entrepreneurs who did not take a pay check for a couple of years while starting a business to keep it alive before they could finally draw a paycheck for themselves. Remind you, my only payroll in 2015 came from training telephone technicians.
Here is a copy and paste of the email:
[Nothing on the email said I could not share this anywhere else].========================Coinbase has requested a file from you.
Thank you for using Coinbase for your business activity. Due to your processing volume, your Coinbase transaction activity last year met U.S. tax reporting thresholds. As a result, we kindly ask you to please do the following:
1. Complete the fillable Form W-9 found here:
https://www.irs.gov/pub/irs-pdf/fw9.pdf. Please fill out the basic information in boxes 1 through 6 and enter the applicable Taxpayer Identification Number in Part 1. Note: you may enter tax exemption codes, if any apply to your business, in Box 4. (If you believe the Form W-9 does not apply to you, please email us at
taxfiles@coinbase.com and we will help you find the proper form.)
2. Sign and date the form on the line in Part II.
3. Upload the completed and signed Form W-9 using the Kiteworks website.
Coinbase will retain your completed form for tax reporting purposes and we will send you a Form 1099k in the next few weeks for your own records. If you have any questions please do not hesitate to reach out to
taxfiles@coinbase.com. Please return the completed Form W-9 to us by January 25 so we can meet federal tax filing deadlines.
Upload link expires: Jan 25, 2016This upload requires authentication.
To upload your file, please activate your account by creating a password.
========================If you read the instructions for US Form 1099-K you will see the following in the instructions:
https://www.irs.gov/instructions/i1099k/ar02.html#d0e387Exception for de minimis payments. A TPSO is required to report any information concerning third party network transactions of any participating payee only if for the calendar year:
The gross amount of total reportable payment transactions exceeds $20,000,
AND The total number of such transactions exceeds 200.
========================Box 4. Federal Income Tax Withheld
Enter backup withholding. Persons who have not furnished their taxpayer identification number to you in the manner required are subject to backup withholding on payments required to be aggregately reported in box 1a.
========================My question is this: How does Coinbase KNOW what transactions are payments and what transactions are simply transfers from their wallet to a hardware wallet for cold storage? What if I then [Later] transfer all or part of funds from cold storage back to my Coinbase wallet and use it later on to purchase rigs or other hardware? Will the transfer from cold storage wallet to coinbase be counted as a "transaction" or thought to be a "payment" to me by Coinbase? How the hell do they KNOW what is a payment and what is not?
Another example: If I transferred $70,000 USD to my Coinbase account THEN purchased $70,000 worth of rigs, then transferred $70,000 to my cold storage wallet, then later transferred back to my coinbase wallet, then later bought $70,000 worth of rigs, is this to be reported as $280,000 worth of transactions on form 1099-K?
Another example: I paid for something with bitcoin via escrow. Let's say it did not work out and I get refunded that same amount. Is the refunded amount to be added to the form 1099-K as well?
How do they know what is payments and what is not? How do they know what is simply a transfer to what would be considered a savings account (cold storage) and then transferred back to what would be considered a checking account (everyday wallet)?
This will be interesting when I get the form 1099-K to see the gross dollar amount they put on the form.
We will see what is put on the 1099-K and if discrepancies have to be fixed, how well will Coinbase communicate with me to fix those discrepancies? Will they ignore me or assist me?
The purpose of this post is to help others to avoid going through what I'm going through. Especially, if this ends up being a long grueling process of editing one discrepancy after another regarding form 1099-K. I hope others will be able to learn from this experience I'm about to go through and how to avoid a lot of headache on our end and on Coinbase's end. I'm sure they will not enjoy fixing discrepancies either.
I now have to make sure I'm DEFINITELY organized. I can see a visit from the tax man very easily this year if my Form 1099-K is not accurate and Coinbase does nothing with me to fix discrepancies.
If Coinbase is helpful with me in fixing any possible discrepancies, I will change the title of this thread to reflect it and I will post in detail how they assisted me.
If Coinbase is not helpful with me to fix any possible discrepancies and makes this a long, grueling and stressful process , I will be on a mission to put an end to anyone doing business with Coinbase.
Hopefully, [as a miner who works to process transactions and strengthen the bitcoin mining network] I'm not spat upon and ignored by those who benefit from my work of securing the network and keeping it decentralized and thereby assisting them in continuing their prophets from the exchange and bitcoin mining network.
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